Question

BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $118,500 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 2.9% of the first $7,000 paid to its employee.

	Gross Pay through August					Gross Pay for September
a.		$	5,000				$	2,100
b.			18,700					2,600
c.			112,700					8,500

Exercise 9-5 Computing payroll taxes LO P2, P3

Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for September under each of three separate situations (a), (b), and (c). (Round your answers to 2 decimal places.)

a) Tax September Earnings Subject to Tax Tax Rate Tax Amount FICA—Social Security $2,100.00 6.20% $130.20 FICA—Medicare 2,100.00 1.45% 30.45 FUTA ?? 0.60% 7.20 SUTA ?? 2.90% 15.95 b) Tax September Earnings Subject to Tax Tax Rate Tax Amount FICA—Social Security       FICA—Medicare       FUTA       SUTA       c) Tax September Earnings Subject to Tax Tax Rate Tax Amount FICA—Social Security       FICA—Medicare       FUTA       SUTA

Assuming situation a, prepare the employer’s September 30 journal entries to record salary expense and its related payroll liabilities for this employee. The employee’s federal income taxes withheld by the employer are $90 for this pay period. (Round your answers to 2 decimal places.)

	Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)   September Earnings Subject to Tax Tax Rate Tax Amount Federal income tax     $90.00

Assuming situation a, prepare the employer’s September 30 journal entries to record the employer’s payroll taxes expense and its related liabilities. (Round your answers to 2 decimal places.)

	Employer Payroll taxes September earnings subject to tax Tax Rate Tax Amount                                   $0.00

Answer 1

a)
Employer Payroll taxes	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	$ 2,100	6.20%	$ 130.20
FICA-Medicare	$ 2,100	1.45%	$ 30.45
FUTA	$ 2,000 ($7,000 (-) $ 5,000)	0.60%	$ 12
SUTA	$ 2,000 ($7,000 (-) $ 5,000)	2.90%	$ 58
b)
Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	$ 2,600	6.20%	$ 161.20
FICA-Medicare	$ 2,600	1.45%	$ 37.70
FUTA	$ 2,600	0.60%	$ 15.60
SUTA	$ 2,600	2.90%	$ 75.40
c)
Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	$ 5,800 ($118,500 (-) $ 122,700)	6.20%	$ 359.60
FICA-Medicare	$ 8,500	1.45%	$ 123.25
FUTA	$ 0	0.60%	$ 0
SUTA	$ 0	2.90%	$ 0

	Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)
	September Earnings Subject to Tax	Tax Rate	Tax Amount
Federal income tax			$ 90
FICA - Social Security	$ 2,100	6.2%	$ 130.20
FICA - Medicare	$ 2,100	1.45%	$ 30.45
Total			$ 250.65

Date	General Journal	Debit	Credit
Sep-30	Salaries expense	$ 2,100
	Employee Fed. income taxes payable		$ 90
	FICA - Social Security taxes payable		$ 130.20
	FICA - Medicare taxes payable		$ 30.45
	Salaries payable   - Balancing Figure		$ 1,849.35
	(To record the aacued Salary expense and its payroll liabilities )

Employer Payroll taxes	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	$ 2,100	6.20%	$ 130.20
FICA-Medicare	$ 2,100	1.45%	$ 30.45
FUTA	$ 2,000 ($7,000 (-) $ 5,000)	0.60%	$ 12
SUTA	$ 2,000 ($7,000 (-) $ 5,000)	2.90%	$ 58
	Total Taxes withheld		$ 230.65

Date	General Journal	Debit	Credit
Sep-30	Payroll taxes expense	$ 230.65
	FICA - Social Security taxes payable		$ 130.20
	FICA - Medicare taxes payable		$ 30.45
	Federal unemployment taxes payable		$ 12
	State unemployment taxes payable		$ 58
	(To record the Payroll taxes expense )